Multilateral Agreement on Investment: Time to Awaken the Beast? – A contribution to the “Business and Human Rights Treaty” Debate

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I. Difficulties around the contents of a business and human rights treaty

In September 2013 Ecuador together with a group of states asked the UN Human Rights Council to consider drafting a binding business and human rights treaty, building on the UN Guiding Principles on Business and Human Rights. They have received support from a number of  NGOs (see also this). They have also received advice to only go that route with great caution from the former UN Secretary-General Special Representative on Business and Human Rights, Prof. John Ruggie, the father of the Guiding Principles for all practical purposes.

It is unclear what Ecuador has in mind in terms of contents. If they want to simply list state obligations with regards to business activities on their territories, then arguably no further treaty is required as all existing human rights treaties encompass obligations to prevent violations by third parties, in this case businesses. The only added value of such a treaty would perhaps be the creation of a treaty body to monitor its implementation, following a well-established UN model. All things considered, this would not be very onerous.

But Ecuador and its allies on this may want to go further and include in the treaty a list of state obligations with regards to the extraterritorial activities of companies domiciled on their territories, hence clearly targeting western states which remain the leading capital-exporting countries. While a number of UN treaty bodies have suggested that states do indeed have obligations in this regard under existing human rights treaties (I presented on this at the Norwegian Centre for Human Rights in November 2013) the contours of such obligations are still unclear. For example, does that mean, as suggested in the Guiding Principles, that states “should set out clearly the expectation” that companies operating abroad should respect human rights? Or does that mean, going further, that states actually have an obligation to provide victims of violations with a remedy? A treaty would have to clarify this point, which is currently highly disputed.

Perhaps Ecuador wants to go even further and enter the minefield that is the recognition that companies have human rights obligations under international law. This route was essentially abandoned in 2004 after the failure of the UN Draft Norms, and it is an understatement to say that it is a vast area of academic debate. The most uncontroversial aspect of it, as John Ruggie highlighted it in his contribution, is the idea that corporations should not commit human rights violations amounting to international crimes. But for the vast majority of violations that fall short of international crimes, there is little agreement.

II. A proposed way out: focus on investment law

Given the complexity of the subject and the lack of consensus around many of its aspects, perhaps the way forward is not to shut the door to the very idea of a treaty, but to pursue a less ambitious goal. With this in mind, I suggest we focus our efforts on the international investment legal framework. International investment law is a solid branch of international law, with established rules and principles. Today there are over 3,000 bilateral investment treaties (BITs) in force, which clearly shows that states crave legal certainty in the area. Reviving the idea of a Multilateral Agreement on Investment (MAI) will undoubtedly sound rather scary to some, who may not be willing to awaken the beast. Negotiations for the MAI at the Organization for Economic Cooperation and Development (OECD) failed at the end of the 1990s, partly because of strong disagreements over the inclusion of human rights considerations in the text. Some have blamed “NGOs” for the failure of the treaty. Re-opening negotiations, therefore, may seem like a very bad idea.

However, I would argue that the context has significantly changed since then. The very idea of including human rights considerations in BITs is now more widely accepted. The US model BIT of 2012 contains labour clauses. The UK Action plan for the implementation of the UN Guiding Principles on Business and Human Rights lists among the new actions planned by the government that they will “ensure that agreements facilitating investment overseas by UK or EU companies incorporate the business responsibility to respect human rights, and do not undermine the host country’s ability to either meet its international human rights obligations or to impose the same environmental and social regulation on foreign investors as it does on domestic firms.”

Beyond these anecdotal changes, the formidable convergence around the UN Guiding Principles (reflected in official discourse of the OECD, the European Union and the International Finance Corporation to name but a few) is perhaps the stronger sign that things have changed and the thought that human rights now form part of the global discourse on business in general, and investments in particular, is not so incongruous. In this new context, it may be time to awaken the beast indeed and to re-open negotiations for a Multilateral Agreement on Investment, which would include both home and host state duties to protect human rights, the corporate duty to respect human rights and the principle that victims should have access to remedies in host or home states. In short, it would set the discussions on a “binding business and human rights treaty” within a clear, relatively self-contained framework.